Monday, February 20, 2017
China reels under debt load; Russia overtakes Saudi as top oil producer; World's largest yacht impounded
1 China reels under debt load (Khaleej Times) Chinese banks lent more money in January alone than the annual GDP of South Africa, as borrowers rushed to take advantage of government policies intended to stimulate the economy with easy credit.
But the free-for-all has had unintended consequences, creating a tottering tower of unsustainable debt, with Beijing now trying to tighten monetary policy and reduce access to credit without bringing the entire edifice crashing down.
Chinese debt exceeded 270 per cent of the country's GDP by the end of 2016, stoked by multiple interest rate cuts as well as the growth of the unregulated "shadow finance" credit sector which involves lending to already indebted companies. Thanks in part to the easy credit, China's economy expanded by 6.7 per cent last year, with a construction boom and increased public spending on infrastructure.
But the world's second largest economy is now saddled with an unwieldy debt load, Andrew Fennell of ratings agency Fitch said in a January 23 note, adding that "China's stable growth reflects stimulus, not sustainability".
The abundance of cheap cash has had unexpected consequences: the cost of garlic jumped 80 per cent last year on speculation, investors poured money into bitcoin and real estate prices in some parts of the country have gone through the roof. At the same time, empty apartment buildings have mushroomed across cities where builders are struggling to find clients willing to invest in their speculative ventures.
Authorities are also worried about the intensifying risk of corporate defaults, particularly in the unregulated "shadow finance" sector that covers loans to heavily indebted manufacturers and property developers.
2 Russia overtakes Saudi as top oil producer (Gulf News) Russia overtook Saudi Arabia as the world’s largest crude producer in December, when both countries started restricting supplies ahead of agreed cuts with other global producers to curb the worst glut in decades.
Russia pumped 10.49 million barrels a day in December, down 29,000 barrels a day from November, while Saudi Arabia’s output declined to 10.46 million barrels a day from 10.72 million barrels a day in November. That was the first time Russia beat Saudi Arabia since March.
Saudi Arabia and fellow producers from the Organisation of Petroleum Exporting Countries decided at the end of November to restrict supplies by 1.2 million barrels a day for six months starting Jan. 1, with Saudi Arabia instrumental in the plan. Non-member producers, including Russia, pledged additional curbs. Brent crude prices have climbed about 20 per cent since the end of November.
The US was the third-largest producer, at 8.8 million barrels a day in December compared with 8.9 million barrels a day in November, according to JODI. Saudi Arabia’s crude exports declined to 8 million barrels a day in December, from 8.26 million barrels a day, the biggest outflow for any month since May 2003.
3 World’s largest yacht impounded (Rupert Neate in The Guardian) The world’s largest sailing yacht has been impounded in Gibraltar over claims that its billionaire Russian owner owes the shipbuilder €15.3m (£13.3m).
The Gibraltar Port Authority impounded the €400m “Sailing Yacht A” as it was on its way to be delivered to industrialist Andrey Melnichenko, following a legal filing from the German shipbuilder that constructed the futuristic-looking vessel.
The 143m-long Bermuda-registered yacht, which has three masts taller than Big Ben’s clock tower, left the Kiel shipyard of superyacht builder Nobiskrug two weeks ago to conduct final sea trials before being handed over to Melnichenko.
But on Wednesday two Gibraltarian “ship keepers” took control of the Philippe Starck designed yacht, which is longer than 13 London buses and features a helipad, onboard swimming pool, and underwater observation pod. “In the volatile world of shipping, particularly in the recent economic downturn, disputes and defaults are an unfortunate fact of life,” the Gibraltar Port Authority says on its website.
Court papers show Nobiskrug is seeking an outstanding payment of €9.8m, as well as €5.5m for subcontractors and interest charges. The claims are made against Valla Yachts Ltd, the Bermuda company to which the yacht is registered.
Melnichenko is said to have chosen to name his yachts “A” so that they appear first in shipping registers. Sailing Yacht A, which requires 54 crew to operate, has eight decks connected by several lifts, and is capable of achieving speeds of 35 knots downwind. The unique carbon fibre masts can withstand 90 knots of wind with full sail up, the equivalent to a category 2 hurricane or hanging two double-decker buses from each tip.